Investing at an early stage, investors pay close attention to the team. Here's a list of warning signs 🚩 that can hinder funding:
Team members lack experience relevant to the startup. For example: the project about AI in advertising, all team members have PhDs, but none have experience in actual advertising business.
Team skills are not complimentary. We studied at the same business school and get along great, so we should build a startup together. Or I'm a developer, Andrew is a developer, and Helen is a great engineer. Let's start a startup together because we’re all smart. I'll be the CEO because I'm the "loudest."
There are no rules for our work together. "We're a team, and we all do everything together," which means no one takes leadership in specific directions. Today I work 14 hours, tomorrow I'm going on vacation and skipping messages on Slack (isn't a startup about freedom??). The team needs to not only determine responsibilities but also establish clear guidelines for communication, decision-making processes, and documentation. Additionally, it's crucial to outline under what circumstances decisions may be reviewed and what consequences will occur if decisions are not adhered to.
‘Even partnership’. Firstly, roles are never equal. Someone works more, someone is very experienced and can make a couple of quality decisions to take the business to a new level, someone's experience is critical precisely at the early stage, and someone has invested money in the project. Secondly, when the business is evenly divided, no one can make the final decision, which can be a colossal problem in a conflict situation.
Toxic experts. No one knows why, but they don't follow the common rules, they ignore agreements, and they feel superior and more valuable than others. Often it's a smart IT leader with access to architecture. The recipe for dealing with such individuals is the subject of a separate article. For now, I'll just say that this is a red flag for an investor.
You're a solo-founder. There are startups consisting of a single founder. However, the level of concern for an investor will be naturally high. The absence of a team does not allow for assessing your leadership qualities, which is critical for a successful business. Besides, you might get sick, tired, or go on vacation.
Lack of synchronization among team members. Inspired by their vision, the founder talks about a shiny future, the CTO says it's impossible, and the project manager hasn't heard about these plans and is working on a different task. The lack of dialogue between team members is often a result of the founder's big ego, who refuses to accept reality and sincerely believes they're the next Elon Musk.
Family-businesses. Technically speaking, family-owned businesses have existed for thousands of years. On the other hand, would you fire your spouse if they didn't adhere to agreements, or would you tolerate the situation despite growing irritation among other team members?
In conclusion, considering the above, the term "strong team" doesn't always mean that each member is a strong expert. In my understanding, a "strong team" is when members are synchronized, complementary to each other, flexible (to learn new things), and have enough energy to succeed.
Comments